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Mahanagar Gas pushes back IPO to Feb 2016

Vol 19, PW 1 (10 Sep 15) People & Policy

Shell’s proposal to buy the BG group has prompted Mahanagar Gas (MGL) to delay plans for a stock market launch to February 2016.

Jointly owned by BG and GAIL, MGL was originally planning the launch by April-May 2015 to raise Rs600cr ($90m) by off-loading 30-35%. But then in April Shell declared its intention to buy BG under a $70bn deal.

“We put the stock market launch on hold because of the deal,” says an MGL source. “But now BG has asked MGL not to delay it further.

” He adds Shell has agreed to the launch. GAIL, BG and MGL management had a video conference on September 2 and decided to go ahead.

Kotak Mahindra Capital and Citigroup were hired to manage the IPO in January 2015. MGL needs money to grow its pipeline network to serve newly developing residential and commercial areas at Bhiwandi, Shil Phata, Khidkali and Ambernath in Maharashtra with plans to lay two gas pipelines across the Ulhas River using Horizontal Directional Drilling (HDD).

One 2-km pipeline is proposed from the Balkum fire station in Thane to Kalyan Naka in Bhiwandi, along the old Agra road crossing the Ulhas River. The second 500-metre pipeline is proposed from MGL’s City Gate Station at Mahape to Manpada junction in Dombivali along the Kalyan-Shil Phata Road crossing the Ulhas River.

MGL is under pressure to connect 120,000 households this fiscal but the company says it makes a loss of Rs25,000 ($373) on each household connection. With the low oil price industrial gas customers are also switching to cheaper naphtha and pet coke, adding further pressure to margins and the loss of up to 15% of its industrial customer base in the last year alone. MGL has connected over 700,000 households and over 2300 businesses to its piped gas network and supplies CNG to more than 425,000 cars, buses and auto-rickshaws in Mumbai, Thane, Mira-Bhayander, and Navi Mumbai. It has laid 390-km of steel pipeline and over 3850-km of MDPE (plastic) pipeline and operates over 180 CNG stations with more than 970 dispensing points.

MGL is under pressure to connect 120,000 households this fiscal but the company says it makes a loss of Rs25,000 ($373) on each household connection. With the low oil price industrial gas customers are also switching to cheaper naphtha and pet coke, adding further pressure to margins and the loss of up to 15% of its industrial customer base in the last year alone. MGL has connected over 700,000 households and over 2300 businesses to its piped gas network and supplies CNG to more than 425,000 cars, buses and auto-rickshaws in Mumbai, Thane, Mira-Bhayander, and Navi Mumbai. It has laid 390-km of steel pipeline and over 3850-km of MDPE (plastic) pipeline and operates over 180 CNG stations with more than 970 dispensing points.